The financial health of Orlando’s credit unions has improved during the past year, due in part to an uptick in loans for big-ticket items like cars as the economy continues its slow recovery.

And improved balance sheets at credit unions mean they’re now in a better position to lend money, especially to small companies that may want to buy equipment, which, in turn, may create new jobs and further boost the local economy, said Patrick La Pine, president and CEO of the League of Southeastern Credit Unions & Affiliates.

Eight of the 14 locally based credit unions got a five-star “superior” rating or a four-star “excellent” rating for first-quarter 2012 by Coral Gables-

based BauerFinancial Inc., an independent firm that bases its five-star ratings on factors such as credit unions’ asset quality, loan portfolio, underwriting standards and ratio of net worth to assets.

In addition, the firm’s June 14 report gave all Orlando-based credit unions at least a three-star “average” rating or above, compared to just 12 during the same period a year ago when three credit unions — Community Trust Federal Credit Union, Darden Employees Federal Credit Union and Florida Episcopal Credit Union — got a two-star “problematic” or below rating. The most likely factor in a credit union being rated as problematic is having too many bad loans.

Florida Episcopal merged with Insight Credit Union last September; and Community Trust and Darden Employees raised their BauerFinancial ratings to three stars this year.

Statewide, just 3 percent of the 166 credit unions in Florida were rated “problematic” for the first quarter this year, compared to 7.5 percent during the same period a year ago.

The reason for the higher scores: Local credit unions have worked through problem loans and are seeing a slight increase in new loans, particularly car loans, said La Pine. They also cut operating expenses by trimming their budgets and closing low-performing branches.

Although some credit union executives take issue with the validity of BauerFinancial’s rankings, La Pine called them a barometer. “It’s one thing you can look at to gauge the performance and stability of a credit union.”

Four local credit unions reported losses in the first quarter:

• FRSA Credit Union, which is open to residents of Winter Park and those in the roofing, sheet metal and air conditioning industries, lost $20,000. “We are a roofers’ credit union and roofers are not working,” said Marissa R. Tatum, manager of FRSA.

Meanwhile, Fairwinds, Orlando’s largest credit union, also got three stars from BauerFinancial. It has $1.67 billion in assets and made a $140,000 profit in the first quarter this year, down 90 percent from its $1.4 million profit during the same period last year.

Bad loans accounted for 5.1 percent of Fairwinds’ portfolio, but President and CEO Larry Tobin expects to work through much of the nonperforming assets by the end of the year. “Things are improving and continue to be stable.”

Insight Credit Union, which got five stars from BauerFinancial, recorded the highest profit of any of the 14 Orlando credit unions in the first quarter at $1.1 million, up 67 percent from its $658,000 profit during the year-ago period.

Insight President and CEO George R. Davis attributed the improved performance to reducing office and billboard advertising expenses. Insight also closed its Rockledge office and relocated it to Winter Garden, where it has become one of its better-performing branches. In addition, it plans to expand into Levy, Dixie, Taylor, Gilchrist, Suwannee and Columbia counties, and is about to buy a former Central Florida State Bank branch in Ocala.

Darden Employees Federal Credit Union showed one of the biggest turnarounds — going from a one-star, or “troubled” rating from BauerFinancial in the first-quarter of 2011 to three stars in first-quarter 2012.

Darden Employees was formed when Multi-Media Federal Credit, which was open to Orlando Sentinel employees, changed its affiliation to Darden Restaurants Inc. Darden once had a delinquency loan rate of 16 percent but improved that to 1.7 percent in first-quarter 2012.

“We have been able to grow our deposits at a healthy clip,” said Darden Employees CEO Jim Kasch.

Darden Employees doubled its assets to $26 million in the past year and processes about 800 loan applications a month at its sole branch on the campus of Darden Restaurants Inc. in southwest Orlando.

Going forward, credit unions will continue to see a growth in assets and likely a 5 percent increase in loan values, although car loans will continue to grow faster. “The challenges are consumer confidence, loan demand and rates, and increasing compliance costs that come with more federal regulations,” said La Pine. “There is light at the end of the tunnel, but there are a lot of what ifs.”

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